California lawmakers want to tie minimum wage to consumer price index

Gasoline was selling for $3.33 a gallon, Jerry Brown was attorney general, and California was bracing for a budget crisis when the state's hourly minimum wage rose to $8 in early 2008.

Fast forward to now, and much has changed: Gas is almost a dollar higher, Brown is governor, and the state is reeling from years of red ink. But the minimum wage hasn't budged a cent.

New legislation would change that, ensuring future increases for the state's lowest-wage workers while letting lawmakers evade political heat by taking the hot-button issue out of their hands.

Assembly Bill 1439 by Assemblyman Luis Alejo would prohibit the minimum wage from being lowered as consumer prices fall but would mandate increases as prices rise. The indexing would be expected to hike the minimum wage about 14 cents next January, but more importantly, it would set the stage for what could be annual hikes in years to come.

Alejo, D-Watsonville, bills his measure as a way to boost the economy by putting more money in the pockets of workers struggling to provide food, clothes and housing for their families.

"When minimum-wage workers have more money to spend, they spend it," he said. "They can't afford to save it. That is good for all businesses."

The state Chamber of Commerce has labeled AB 1439 a "job-killer" bill. Other opponents range from the California Restaurant Association to the California Farm Bureau Federation.

"Now is not the time to increase the cost of doing business in California, when businesses are just now showing signs of recovery," said Jennifer Barrera, a chamber lobbyist.

AB 1439 puts the minimum wage on "autopilot," Barrera said, "which we don't think is appropriate." Lawmakers should not simply let statistics dictate rates without considering other factors, she said.

Nineteen-year-old Karen Haines is among those who would be affected by AB 1439. She makes minimum wage preparing footlong Subway sandwiches in downtown Sacramento. Money is tight, and when gas prices rise a few cents, she feels it.

"It hurts," she said. "Food is more expensive, gas is more expensive  and you need gas to go to work."

Haines said she can get by on minimum wage only because she is single, has no children and lives with her parents. At $8 an hour, there is no way she could move out, she said.

"I think a lot more people would be able to live on their own, have places to stay, not be out on the street," she said of AB 1439.

Only a tiny portion of California's work force receive the minimum wage, 4.4 percent, according to the state Employment Development Department.

But AB 1439 would have a domino effect, sparking demands for salary hikes from higher-paid employees and increasing the amount of temporary and permanent disability payments made through the workers' compensation system, opponents contend. Businesses would have no way of fighting minimum wage hikes or planning for a rate increase if inflation erupted suddenly, critics argue.

"(AB 1439) puts it on a one-way escalator: In good times it goes up, and in bad times it goes up," said Daniel Conway, spokesman for the California Restaurant Association.

AB 1439 could serve as a disincentive for businesses to relocate to California or for existing businesses to stay, the state chamber contends. California's current $8 minimum wage is 75 cents higher than that of the federal government and ranks seventh highest among the 50 states.

Ten states tie minimum-wage increases to inflation in goods and services.

Economist Sylvia Allegretto, of the Institute for Research on Labor and Employment at UC Berkeley, argues that AB 1439 does not go far enough. California's $8 rate is worth less, when adjusted for inflation, than the minimum wage in 1979, she said.

"I'd rather see a bump in the minimum wage (now), then indexing along with it, year after year, so it doesn't erode," she said.

Alejo proposed a bump-and-index bill last year, but it died before reaching the Assembly floor. "I'm trying to see if we can find a middle ground," he said of this year's effort.

AB 1439 passed the Assembly's Labor and Employment Committee last week on a party-line vote, with Republicans opposed. It now goes to the Assembly Appropriations Committee. Gov. Jerry Brown has taken no position on the bill, aides said.

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